iBankers & insane working hours

Typically, Investment Bankers work 100 hours a week, essentially working for three and getting paid for two. The situation is not very different in Consulting (Strategy). My question is, why such insane working hours?

The possible reasons could be:

• scarcity of qualified & capable people,
• indivisibility of work, or
• incumbents want to retain exclusivity

Let’s take them one by one.

Scarcity of people

Is it about scarcity of trained people? I don’t think so. After all, though iBanks pick the top say 5% from premier business schools, the remaining 95% are also equally well-trained. So, is it a quality issue? I understand that the work is high-end and requires performers who have excellent quantitative skills and who can handle tonnes of stress. But if top ‘n’ people can do it, why can’t the ‘n+1’^st? And extending the logic, why can’t the next and so on? The point I’m making is, over time, this shall lead to increase in workforce and rationalisation of working hours and consequently pay cheques. In fact, this is something that’s happening in the IT industry, at least at the entry level, as distortions of salaries between software and core sector is fast disappearing. Ideally, such a shakeout shall happen in iBanking sphere also.

Indivisibility of work

This appears strange. Modularisation has happened in from software to rocket science. Why not in iBanking? The trends suggest that it can. Already iBanks are setting up shops (KPOs) in emerging economies where back-end and even parallel-end work like Equity Research is being off-shored. So where are we heading?

Incumbents want to retain exclusivity

How can the incumbents be allowed to dictate the terms? If the business is attractive then there will be entry of new players. Why aren’t more players coming in and bringing the prices down? Actually, this is already happening. In India, companies like SBI caps and Kotak Securities are doing just that. But the impact has been limited and still, the JP Morgans and Lehman Brothers have the same stressed-out work culture and obscene pay packages. Why?

The question thus remains, if human resource is not a constraint, if division of work is possible and if entry of new players is happening, why is it that there is more work and less people? Why aren’t the market forces bringing things to equilibrium? Hope economic sense prevails! And if it does, we’ll see iBanks go down in the pecking order in Business Schools… and may be something else take over as has happened with Consults. Of course the assumption is - pay cheques rule.